BP plc (NYSE:BP) (LON:BP) is preparing to slash thousands of jobs worldwide in its oil and gas business by the end of next year, leading to $1 billion in restructuring charges as the oil major responds to the sharp drop in oil prices.

Tumbling oil prices from around $115 a barrel to around $65 a barrel since June, has piled further pressure on the oil major and its peers as revenues are sinking.

BP Plc Anticipates $1 Billion Job Cuts Charge As Oil Tumbles

$1 billion restructuring charge over 5 quarters

As part of its cost-pruning exercise, BP anticipates incurring non-operating restructuring charges of about $1 billion in total over the next five quarters, including the current quarter. In its statement, BP plc (NYSE:BP) (LON:BP) said that it would provide more details in its forthcoming quarterly results.

The oil major’s chief executive Bob Dudley said: “We have already been working very hard over these past 18 months or so to right-size our organization as a result of completing more than $43bn of divestments. We are clearly a more focused business now and, without diverting our attention from safety and reliability, our goal is to make BP even stronger and more competitive”. He added: “The simplification work we have already done is serving us well as we face the tougher external environment. We continue to seek opportunities to eliminate duplication and stop unnecessary activity that is not fully aligned with the group’s strategy.”

BP plc (NYSE:BP) (LON:BP) indicated that while it approved projects at $80 a barrel, it already tested them at $60 to assess the resilience of its portfolio and would continue to consider lower price sets as appropriate.

Oil fall could lead to $100 billion reduction in capital spending

Christopher Adams of FT points out that analysts anticipate the sharp fall in crude prices will lead to $100 billion or more in reduced capital spending by oil and gas companies worldwide, particularly in high-cost areas.

According to a spokesman from the firm, the bulk of the restructuring costs at BP plc (NYSE:BP) (LON:BP) will go towards staff redundancies in all segments, including oil exploration and production, refining and trading and administration.

In September, a federal court judge found that BP was grossly negligent in connection with the 2010 Gulf of Mexico oil spill.. The oil major could face as much as $18 billion n penalties. Moreover, the company said in its earnings statement that it already wrote down a $43 billion charge to cover all the costs related to the oil spill.

Interestingly, Conoco Phillips Inc, the U.S.’s third-largest producer announced Tuesday it was slashing its investment budget for next year by around $3 billion or 20%, saying it would defer spending on more marginal projects including the Montney and Duvernay fields in Canada.